The Harvard Joint Center for Housing Studies has published a new report titled “Improving America’s Housing 2019.” Through education, research and outreach, the JCHS mission is to help leaders in government, business and civic sectors make decisions that address the needs of cities and communities.
This report explains the economic, demographic, and natural disaster’s impact on the current and future growth of the residential remodeling market, now an estimated $425 billion. According to the JCHS report, 80 percent of the nation’s 137 million homes are 20 years old and 40 percent are at least 50 years old. I did the math. That’s at least 54 million old homes.
Some new, less obvious details about remodeling’s growth are outlined by Harvard:
Natural disasters, including fires and floods, account for an increasing share of total spending on residential repair and remodeling: $27 billion, spent largely in the Midwest and Southern U.S. This is double what it was twenty years ago.
Replacement projects, like re-roofing and HVAC upgrades take up a larger share of homeowner improvement budgets than before the recession of 2007-2011. Now, these expenditures are 50% of the total remodeling market, equal to the amount that homeowners spend on “discretionary” remodeling projects like kitchen and bath makeovers. This likely reflects the deferred maintenance of the recession as well as energy upgrades to save money on utilities.
Old house owners have “invested heavily in improvements to units previously rented or vacant.” The report highlights an increase of 1.5 million housing units which changed from rental or vacant units to owner-occupied. More than 70% of these homes are single-family detached.
Demographics continue to drive remodeling growth with people 55 years old or older, dominating the market. Much of this is due to homeowner’s desire to “age in place,” which often requires upgrades for better accessibility throughout the house. The 35-54-year-old cohort still spends more per remodeling project but their expenditures, as a percent of market share, are down. The 55-plus cohort spending share is up.
Not surprisingly, the Harvard JCHS research corroborates my thesis that first-time buyers will buy fixer-uppers in affordable housing markets like Detroit, Buffalo, Asheville, and Des Moines. The high cost of new housing and very fast escalation of prices in major markets is driving this trend.
The moment we’ve all been waiting for is finally here, sort of. People under the age of 35, millennials, are beginning to spend on home ownership and home remodeling. Harvard’s Joint Center for Housing Studies' report exclaims, “As challenging as the employment and housing markets are for younger households, the number of homeowners under age 35 did rise 6% between 2015 and 2017 to 7.3 million—the first increase in a decade.”
This is good news for us baby boomer parents. Our kids are moving out of our basement. Now I can remodel the basement into the man cave I’ve always wanted.